Newt Gingrich has a lot to say about how to fix America's economic problems, suggesting everything from employing schoolchildren as janitors to adhering to the somewhat wonky "Lean Six Sigma" business management philosophy.
But, when it comes to fixing the collapsed housing market, the former House Speaker—now the GOP presidential races' frontrunner—is pretty much mum on the subject.
In his 21st Century Contract with America, Gingrich lays out detailed plans to repeal health care reform, secure the nation's borders, and balance the federal budget. He casually mentions repealing the Dodd-Frank Act, which has driven down the value of housing and crippled home sales according to the Contract.
But save for a brief history lesson on rising and falling home prices, concrete plans for resuscitating the housing market are nowhere to be found.
Some think it's not such a bad thing that Newt's vague on the housing crisis.
"It has become an urban legend that we're not recovering because housing prices are low," says Peter Morici, an economics professor at the Robert H. Smith School of Business at the University of Maryland in College Park. "During the boom, we amassed a huge trade deficit. That creates a hole in demand. That's what's holding back the recovery this time."
[Read: Fannie and Freddie Big Wigs Under Fire For Lavish Spending and Bonuses.]
"The real solution is what Gingrich and Romney are talking about: doing something about the trade deficit and doing something about U.S. energy dependency," Morici adds. "There is no easy way around the fact that so many people are underwater [on their mortgages]. Some economic problems just have to fester, they're not subject to public policy."
But just because there's no easy solution, doesn't make the magnitude and impact of the problem any easier to swallow. As Morici hints at, an estimated 11 million Americans have underwater loans and another 6 million are seriously delinquent. That's a whole lot of potential foreclosures that could flood the market, further driving down prices and possibly dragging the U.S. economy down with them.
Why does it matter? Remember, almost two-thirds of Americans own homes, which are for many, the largest purchase they'll ever make, and their most important asset. But as we know all too well from the ongoing housing bubble saga, homeowners across the nation have been slammed with demoralizing drops in home values. The equity homeowners thought they had socked away in their homes for retirement or other financial goals evaporated in the space of a few months.
Many Americans justifiably feel poorer. Add to that deep uncertainty about the jobs market, and you'll get an economy sputtering along at slow growth, vulnerable to the tiniest shocks, like the United States has been for the past few years.
[Read: New-and-Improved HARP 2.0 Is Here.]
To be fair to Newt, the stock of Republican candidates hasn't exactly been bursting at the seams with ideas on how to fix the housing market. President Obama has come up short with solutions as well, according to some critics. But now, as Gingrich surges to the forefront of the GOP race for the White House, Americans might be increasingly wondering where his allegiances really lie. Are they with Freddie Mac, the government mortgage giant that reportedly paid him $1.6 million to consult and advise? Or is it with the taxpayers, who have been stuck with an expensive $151 billion bill to bail out Fannie and Freddie?
Gingrich's campaign did not immediately respond to a request for comment.
What do you think? Has Gingrich missed the boat when it comes to addressing the housing crisis? Weigh in with a comment below.
mhandley@usnews.com
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rg1 of MO 1:37PM January 12, 2012
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